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Even in a 401(k) plan, a spousal waiver would have to be witnessed by either a notary or a plan representative before it is valid. If you haven't done that and you were married for at least a year, you are his beneficiary. If you were married less than a year, the plan document will determine if you are treated as a surviving spouse or not. My suggestion is to send the plan sponsor a letter telling them you are his surviving spouse and that your letter is a claim for the death benefits from his account. Include a copy of your marriage license, if you have it available. If they think you are not entitled to receive the benefits, they are supposed to explain why, including cites to appropriate sections of the plan document.

I have a hard time imagining a scenario where it is other than the insured.

Even a 401(k) plan you would have had to sign a form in order for you as the spouse to not be the beneficiary. I would ask the Plan Administrator if they have a form with your signature on it saying you waived your rights to be the beneficiary. You might want to let them know you are the legal wife of the deceased. What I can tell you is that people tend to "fire and forget" beneficiary forms. By that I mean they fill them out once when they first get hired or when they enter the plan and never think about them again. So if your husband worked for this company and then you got married it is possible your husband never changed the form to include you. But if that happened the form is very likely null and void upon the marriage. So it is possible if this is a large company or they use an outside service they don't know he was married and they are merely going off the form. So let them know he was married. If the people you are dealing with aren't part of the HR department of your late husband's employer maybe call them and ask for help to let the people who run the plan know he was married at the time of death. Keep asking questions!!! Lastly, I am not trying to be mean but I have to ask this: Are you sure you didn't sign a waiver of your right to be a beneficiary?

With respect to the prohibited transaction issue, the timing requirements relate to separation from the employer's assets and delivery to the trust. Credit to individual accounts is not involved. I will let others speak to the plan disqualification and contract issues (not administering the plan in accordance with its terms).

I am assuming this is a balance forward plan. If it is an individual directed account plan I don't see how this is even a question. What I can tell you if for example X was getting 100% of the insurance proceeds and my account was taking a hit to pay taxes on those funds (and I figured out that was happening which might be hard) I would be an unhappy camper. This really strikes me as an individual account investment within an otherwise balance forward plan and the individual account holder takes 100% of the good and bad. They get the proceeds but pays the tax also. Any other treatment seems illogical and inconstant. I have never seen the benefits of an investment go to one person and the costs of that investment go to a group.

Agree with kcbirm. I would be curious if anyone can even come up with a scenario where a tax exempt trust/plan would pay a participant's taxes. Edited to add: if the policy is being liquidated and the value distributed, then there isn't a >distribution of insurance". It's just a distribution.

I'm with Austin here. Even the most rudimentary software should limit.

Thanks. I had already asked for more details, so we'll see what is really happening once additional details are communicated.

Is it possible the purchase price was paid when the business was sold and this is some kind of bonus or incentive comp paid to the Dr. to incentivize him to help retain his former patients? I think you need to get more details. I can see where this isn't comp and where it is based on small differences in the details. I just think you (or us on this board) have enough details to know what it is. It sounds like you need to talk to someone who can give a better description. Maybe the client needs to get their attorney to make a ruling.

Afterthought - if they did go to the trouble and expense to set up some trust thing in the estate, how is it possible that everyone involved was so careless as to not coordinate that by designating a suitable beneficiary?

I don't think it's that unusual. There are pros and cons to everything, in this case, the buyer gets to deduct what is effectively a purchase by paying the buyout as wages. More expensive to the seller to receive ordinary income than to get it as an asset sale, but maybe it's easier and maybe it's all factored in. Anyway, I think you'd be out on a limb to call it anything but wages. But there might be - are - ways to keep the seller out of the new plan, assuming there is one, like just excluding him.

They can disclaim but do they want to and should they? Why the pressing need to get the money into the estate? (Other than the attorney creating this red herring in the first place.) If I were one of the 4 children and I would get less by having the money go into the estate, I'd be reluctant to sign a waiver, without having some good reason. Sounds like a typical case where somebody doesn't know what they are doing, trying to get everyone else to stand on their head.

It depends on the terms of the DB plan. A DB plan is permitted, but not required, to accept rollovers. And if it accepts them, it can provide for whether they simply go into an account for the participant, or may be used to purchase an annuity.